One Person Company: Why is this model such a craze in India?

If you want to know about the business model of a One Person Company, then you must learn all about its features and the benefits it offers to its executives during its operation.

Why should one opt for OPC registration model?

An OPC is a One-Man Turf

  • A One-Person Company registration allows its sole member the desire for personal freedom to adopt the business of his choice.
  • An OPC registration is a personality-driven passion and implementation of a business plan.
  • An OPC registration allows the entrepreneurial person to take the extra risk and responsibility for his proposed startup.
  • Personal commitment to the business is the sole idea behind OPC registration. Read More: Section 8 Company Registration
  • A One Person Company registration is incorporated as a private limited company by the MCA (Ministry of Consumer Affairs). Individuals run it, yet an OPC is a separate legal entity similar to any registered corporate.

An OPC is a Single-Membership affair

  • An OPC can have only one member and one director at any time.
  • The member and nominee should be natural persons, Indian Citizens, and residents in India.

Note: The term “resident in India” means a person who has stayed in India for not less than 182 days during the preceding calendar year.

  • A One Person Company cannot incorporate more than one OPC or become a nominee in more than one OPC.
  • Suppose a member of an OPC becomes a member in another OPC by his being a nominee in that OPC, then within 180 days. In that case, he will have to meet the eligibility criteria of being a Member of one OPC.
  • No minor can become a member or a nominee of the OPC registration or hold its share with beneficial interest.

An OPC has fewer investment requirements

  • A registered OPC can lose its status if the required paid-up capital of the OPC exceeds 50 lakh rupees.
  • Also, the company can lose its status if the average annual turnover is more than two crores in three consecutive years.

An OPC can be easily converted to other Business models

  • A One Person Company registration cannot be incorporated or converted into any other type of company, as defined under the Companies Act of 2013.
  • Also, such companies cannot carry out Non-Banking Financial Investment activities.
  • An OPC cannot convert voluntarily into any company unless two years have expired from the date of incorporation. But, in cases where capital or turnover threshold limits are reached, one can apply for conversion.
  • An existing private company other than a company registered under section 8 has a paid-up share capital of Rs. 50 Lakhs or less or average annual turnover during the relevant period is Rs. 2 Crores or less can convert itself into One Person Company by passing a special resolution in the general meeting. Read More: Startup Registration      

What benefits does an OPC offer to its model subscriber?

OPC promote startups

An OPC registration aids startup entrepreneurs with a new business idea who want to concretize it into a living reality. By this, an OPC provides an outlet for entrepreneurial impulses among the youths.

OPC offers Limited Liability to its member

The most significant reason for shareholders to incorporate the OPC is the desire for limited liability. This is the fundamental difference between a registered OPC and a sole proprietorship. An OPC is not a proprietorship because it gives a dual entity to the company as well as the individual, guarding the individual against any pitfalls of liabilities.

OPC required fewer compliances

  • Unlike other limited companies (listed or unlisted, public or private), an OPC must not bother too much about compliances.
  • Businesses currently run under the proprietorship model can easily convert into OPCs without much regulation.
  • In an OPC, the mandatory rotation of an auditor after the expiry of a maximum term is not applicable.
  • The company secretary or its director must sign the annual return of a One Person Company registration.

Less capital requirement

  • An OPC registration can raise capital from others like venture capital financial institutions etc., thus graduating to a private limited company. Read More: Nidhi Company
  • The director of a One Person Company alone can sign the company’s financial statement.
  • Also, Cash Flow Statement is not a mandatory part of financial statements for a One Person Company.

If you want to know about the business model of a One Person Company, then you must check out its features and offered benefits. Read this article to know more.

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